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1.Assume the cost of capital of Reliable Gearing is 10% when it has zero debt. a.What would be the cost of capital after the debt

1.Assume the cost of capital of Reliable Gearing is 10% when it has zero debt.

a.What would be the cost of capital after the debt issue in each case? Assuming the company pays a 50% tax rate

b.What was ROE before the debt issue and after the high-debt plan issue?Use Dupont analysis

c. Could you assess if the company created value by following the high-debt plan?

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